Tipping Point: Why has EPFO decided to invest in AA+ bonds?

This week the Employees’ Provident Fund Organisation (EPFO) decided to invest a part of its corpus in AA+ bonds. Of the current investment of Rs 15,000 crore, it has decided to invest Rs 3,000 crore in AA+ bonds. The balance Rs 12,000 crore will still be invested in AAA bonds. It has made this move to earn higher returns in a falling interest-rate scenario.

Does this put my EPF corpus at any risk?

Not really. According to Crisil’s definition, those with AA rating are deemed to carry high safety. The EPFO will take a few additional precautions. It will invest only in those bonds that have been rated AA+ by at least two rating agencies, have been profitable for the past three consecutive years, and have a net worth of over Rs 1,000 crore. This should put investors at ease.